Asian Development Outlook 2013: Asia's Energy Challenge

Estimates that regional economic growth in the Asia Pacific region will pick up to 6.6% in 2013 and reach 6.7% in 2014. This is a distinct improvement on 2012, when growth stood at just over 6%.

ADB's Asian Development Outlook (ADO) 2013 estimates that regional economic growth in the Asia Pacific region will pick up to 6.6% in 2013 and reach 6.7% in 2014. This is a distinct improvement on 2012, when growth stood at just over 6%. Consumer prices are expected to rise by 4.0% in 2013 and 4.2% in 2014, up from 3.7% last year.

Leading regional economies are settling into a pattern of more moderate, more sustainable growth, founded on new opportunities nearer to home, including domestic consumption and intra-regional trade. Meanwhile, Asia's contributions to global imbalances - its persistent current account surpluses - are smoothly winding down. Yet, developing Asia's recovery phase remains vulnerable to shocks. Strong capital inflows could feed asset bubbles, for example.

Asia's energy challenge

ADO 2013 features a special chapter on Asia's energy challenges. The region needs an ample supply of clean, affordable energy to continue its rapid growth in the coming decades. To achieve energy security, developing Asia must actively contain its rising demand, aggressively explore new supply sources and technology, and progressively integrate regional energy markets and infrastructure.

Key messages

ADO 2013 key messages include the following:

Developing Asia's gross domestic product is forecast to expand by 6.6% in 2013 and 6.7% in 2014, following the slower 6.1% pace in 2012;

Growth will rebound in the People's Republic of China, from 7.8% in 2012 to 8.2% in 2013 and 8.0% in 2014, driven by strong consumption and investment;

India's growth has the potential to pick up from 5.0% in 2012 to 6.0% in 2013 and 6.5% in 2014, but the South Asian giant must create a more favorable environment for investment if it is to sustain this higher rate;

Southeast Asia is benefiting from robust domestic demand and greater trade with its neighbors in the region;

Continued sluggishness in the United States, euro area, and Japan suggests that developing Asia must continue to shift toward more domestic demand and trade with emerging markets;

Inflation is expected to tick up from 3.7% in 2012 to 4.0% in 2013 and 4.2% in 2014. These pressures remain manageable for now, but will need to be monitored closely, especially as strong capital inflows raise the specter of potential asset market bubbles;

Developing Asia's favorable fiscal position cannot be taken for granted, as longer-term structural issues need to be addressed to ensure inclusive growth in the future;

Political risks are emerging as the main threats to the region's continued robust growth over the forecast horizon;

With its rising prominence in the global economy, developing Asia has become a major player in commodity markets;

Developing Asia's energy needs will expand in tandem with its growing economic influence, but its own endowment is insufficient;

Expanding renewable energy sources will not be enough to meet future demand. Consequently, Asia needs to invest in making conventional power cleaner and more efficient; and

Asia must aspire to the degree of regional cooperation and integration in energy by 2030 that currently prevails in Europe.

Background

The annual ADO provides a comprehensive analysis of economic performance for the past year and offers forecasts for the next 2 years for the 45 economies in Asia and the Pacific that make up developing Asia.

ADB Mobile Apps

ADB encourages websites and blogs to link to its web pages. Articles may be republished without alteration with the attribution statement “This article was first published by the Asian Development Bank (www.adb.org)" and a clickable link back to adb.org.